Chasing Stars: Why the Mighty Red Sox Struck Out

When the Red Sox announced they had signed away veteran pitcher John Lackey from the Anaheim Angels, it was the start of one of the most expensive talent hunts in baseball history. So why were the Red Sox an epic failure in 2011? Lackey's lackluster performance is a case study in the perils of chasing superstars, says Professor Boris Groysberg. Key concepts include:

Firms and sports teams alike often make the mistake of believing that star quality is portable from one organization to the next.

In addition to an employee's innate talent, star performance is often also dependent on factors such as organizational culture, networking opportunities, and the general team dynamic.

After luring a star performer away from a competitor, it behooves an organization to invest some resources in integrating that person into the new environment.

by Carmen Nobel

In the fall of 2009, baseball's Anaheim Angels knocked the Boston Red Sox out of the American League Division Series in a humiliating three straight games. Within a matter of weeks, Sox general manager Theo Epstein had launched one of the most expensive retooling efforts ever seen in professional sports, a two-year campaign to acquire star performers with extraordinary multimillion-dollar, multiyear contracts.

“It seems like more and more in our economy, we believe if you were a star somewhere else, we can bring you over and right away you will be a star working for us."

There was Anaheim Angels starting pitcher John Lackey, signed in December 2009 to a five-year $85 million deal; San Diego Padres first baseman Adrian Gonzalez, lured in 2011 by a seven-year deal at $154 million; and Tampa Bay Rays outfielder Carl Crawford, inked this year for seven years and $142 million. In all, the Sox had a player payroll of about $162 million for the 2011 season, the third highest in the league, with all-star caliber performers at almost every position.

Fans and observers hailed the 2011 Red Sox as potentially one of the greatest teams of all time. But in the final month of September, the Sox lost 18 of its last 24 games. Coming into September with a nine-game lead, the team was knocked out of a playoff berth on the last day of the season—one of the biggest flameouts in baseball history.

What happened? How could all that talent strike out on the field? Why did all of these big-name signees crash and burn when it mattered most?

It's a case study in the common but misguided business practice of recruiting superstars, says Harvard Business School Professor Boris Groysberg, author of Chasing Stars—The Myth of Talent and the Portability of Performance. He and several colleagues have studied the issue in multiple industries, including the equally competitive fields of sports and investment banking. After examining the careers of more than 1,000 Wall Street analysts, for instance, they found that analysts who were star performers at any given investment bank tended to underperform after being lured to a new bank—foundering not only at the start of the new job, but for years afterward.

No Patience For Building

A key reason for that underperformance is that stars are often expected to thrive right off the bat, with little or no training to help them adjust to the new environment.

"In big markets, nobody wants to hear about bridge periods," Groysberg says, referring to times when ball clubs (or companies) decide to sacrifice immediate performance to focus on developing young talent. "This applies to sports, and this applies to business. Baseball fans who are paying hundreds of dollars for a ticket don't want to hear about bridge periods, and neither do board members. We've lost a lot of patience with developmental strategies in recent years. It seems like more and more in our economy, we believe that if you were a star somewhere else, we can bring you over and right away you will be a star working for us."

(Indeed, at the end of the 2009 season, Epstein had publicly stated that his team was "kind of in a bridge period." This was upsetting to Bostonians; their team had swept the World Series in both 2004 and 2007, and they had grown accustomed to the thrill of victory. "This is not what Red Sox fans want to hear," commented sports columnist Dan Shaughnessy. "In Boston the message needs to be 'win now.'" Within a matter of weeks, Epstein had launched an all-star buying spree instead, to the initial glee and subsequent frustration of Red Sox Nation.)

Groysberg contends that the "plug and play" mentality about stars simply doesn't work, whether the playing field is a baseball diamond or a trading floor. In addition to an employee's innate talent, job performance is often also dependent on factors such as organizational culture, networking opportunities, the general team dynamic, and the pressure of a new spotlight.

“There's a certain relationship that those players have to have. Can this person be a good fit based on the team dynamics created by the other players already?"

Take Sox starting pitcher Lackey, a star performer in his eight years with the Angels. Transported from laid-back Southern California to hot-cauldron Boston, Lackey posted a mediocre earned run average of 4.40 in 2010, and a league-worst 6.41 in the 2011 season. (Comparatively, Lackey's ERA in his last year with the Angels was 3.83.) Gonzalez, the hotshot first baseman, was great most of the season but collapsed in September--his first experience in a high-stakes playoff run. Crawford, a near league MVP while playing for Tampa in 2010, had his worst season ever when he came to the Red Sox the following year.

In Chasing Stars, Groysberg explains the importance of having an integration strategy, whether a star is joining a new baseball team or a new team of financial analysts. "Even stars need time to adjust to new settings, and successful integration has as much to do with the attitudes of veteran employees as it does with the newcomer," he writes.

Team-specific Roles

Before recruiting stars, it's important to consider whether a star's position is especially dependent on team dynamics. In studying star American football players, Groysberg found that punters showed no major performance decline when they move from one team to another; they operate fairly independently. (In the corporate world, the somewhat autonomous position of the chief financial officer is analogous to that of the punter, Groysberg says.) But wide receivers, whose actions on the field are dependent on the actions of several other players, tended to suffer a performance decline for at least a year after switching teams. (He refers to the position of chief operating officer as "the wide receiver of the corporate world.")

"There's a certain relationship that those players have to have," he says. "Can this person be a good fit based on the team dynamics created by the other players already?"

He notes that the New England Patriots have a good reputation for recruiting players based on how they will fit into the team, rather than on individual star quality. Yet the team has not escaped the star power portability problem. Wide receiver Chad Ochocino has suffered a performance decline since being traded to the Patriots from the Cincinnati Bengals last summer.

Regarding baseball, Groysberg cites a study that discusses how some positions on baseball teams are more team-specific than others. Pitchers, catchers, and shortstops must interact closely with other team members on the field. Thus, their star power may be less portable than that of outfielders, who operate more autonomously. Take star outfielder and designated hitter Johnny Damon, who has performed consistently well on all six major league teams for which he has played from 1995 to 2011.

The Tricky Business Of Managing Stars

Shortly after the historic 2011 meltdown, Red Sox team manager Terry Francona announced that he would not be returning for the 2012 season. Sports fans and observers had mixed feelings about the news; under Francona's reign the team, which had not claimed a championship since 1918, had won the World Series twice in three years.

For Groysberg's part, he believes that Francona's management style--collegially, from the bottom up--simply didn't match the team dynamics this year. (Indeed, published reports confirm the notion that Francona depended on certain players to help him deliver key messages to the team.) But in 2011, absent of obvious team leaders, the Sox may have needed a top-down kind of guy. "In the last few months it became clear that there were issues with team dynamics," Groysberg says "Yes, there were good people on the team. But that didn't make it a good team."

Fans remember 2003 as the year the team rallied around first baseman Kevin Millar's battle cry, "Cowboy Up!" They remember 2004 as the year of star pitcher Curt Schilling winning game six of the American League Championship Series against the New York Yankees, even as an injured ankle visibly soaked his sock with blood. In contrast, 2011 has been the year of starting pitchers drinking in the clubhouse during games (albeit on the days they weren't pitching), rather than sitting on the bench and supporting the team.

"Francona had the perfect style for the team he managed for his first seven years," Groysberg says. "It was a cohesive team. But it was misaligned for the team that was assembled in 2011. There are managers like [IBM's] Lou Gerstner (HBS MBA '65), [General Electric's] Jack Welch, and [Xerox's] Ann Mulcahy, who can manage with multiple styles, but that's rare."

Lessons Learned

In addition to nursing the pain of the past season, Boston's baseball fans are dealing with the recent departure of Epstein, who recently took a new gig as president of baseball operations at the Chicago Cubs. Still, Groysberg says, the fans can learn some general business lessons from the Red Sox—and from all the investment banks that waste money trying to win stars.

"Be cautious about chasing somebody else's stars," he says. "If you have someone who is actually succeeding someplace else, it's always worth asking how much of that person's performance is driven by that other organization- by General Electric, by P&G, by Siemens, by Goldman Sachs. We like to hire people from the companies that are most admired. But most admired organizations are admired for a reason. They usually have processes and cultures in place that make their people better. You take someone from one of those organizations and put them somewhere else, and they'll miss that system that made them great.

"In no way am I saying, 'don't chase stars,'" he continues. "But I'm asking that companies be somewhat strategic about it, the same as they would be when acquiring a company. What organizations need in the 21st century is a hybrid strategy. You have to simultaneously hire and develop the best and brightest."

About the Author

Carmen Nobel is the senior editor of Harvard Business School Working Knowledge.

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Anonymous

Thank you for a fascinating article and for the analysis presented. I honestly wonder if there is something unsustainable in this culture of dumping railroad cars full of money on the shoulders of proven performers, to induce them, in what seems a cynical practice, to jump to a new venue. Will a weary fan base stage an "Occupy Fenway" protest to bring back both reasonable ticket prices, and the honest spirit of fun that once defined competitive sports. Will the oil industry exec. who can gouge the public better than his predecessor always be revered, or will a healthier dynamic prevail when this approach to business, literally, runs out of gas.

Brendan

IT Consultant, IBM

Two thoughts come to mind here. First, we really are talking about a 'balanced scorecard' approach to evaluating fit of a given player into a system. It cannot rely purely on stats yet this is how players are valued in the marketplace. 2nd, lack of player leadership. The captain doesn't play and others lacked the capacity to lead. Rest assured, if Millar was on this team, fists would have been thrown at those perceivd to be slackers,,,may have also come from Youkilis if he wasn't injured.

Greg Cook

K12 Educator

Another parallel is the issue of guaranteed money. Baseball contracts are mostly guaranteed, like a lot of high powered execs. On the other hand, NFL contracts are incentive~laden. The most notorious guaranteed contract in the NFL was the Haynesworth/Redskins contract. That did no one any good.

Anonymous

This article makes little sense on several levels. Among many glaring mistakes, Gonzalez had three experiences in the past six years with high-stakes playoff runs, all with the Padres.

Barry Sauer

Program Manager, CSC

Another great article Boris! I should be noted that the manager was going through personal issues (divorce) and how that coincides with performance. The White Sox first baseman Frank Thomas comes to mind, and I believe many others, as well. Batting is independent, and should be portable and transferable within the League.
As a life-long Cub fan, I am hopeful that Theo will learn and manage these issues better for Chicago!

Louis Pike

Instructor, Ryerson University

It's somewhat disingenuous of the author to ignore the success of the current-day Boston Celtics and the Miami Heat who have risen to the top of the league through acquisition of stars.

Kapil Kumar Sopory

Company Secretary, SMEC(India) Private Limited

No one is a born star. And no one continues to remain a star come what may.There could be very few exceptions. Hence, the factors leading to a person being rated as a star have to be examined in depth. I have live example of a highly acclaimed public sector (government) top executive failing when he changed to private sector. Every so-called star may not be suited to suucceed in certain situations and hence we must be cautious while recruiting such people by not getting carried away by the past. Proper estimate of how he would fit into the new environment is very important.